TT RAM MOHAN's comments on the Indian economy, banking and current affairs

Friday, May 22, 2015

Land Acquisition Bill amendment:NDA's folly

The Modi government has headed off a confrontation over the Land Ordinance by referring to a select committee. That's timely and appropriate. The amendments should not have been a priority for the government at all. By making land acquisition a prestige issue, the government has come across as anti-farmer and anti-poor, as more than one opinion survey carried out on the government's first anniversary shows.

There's no truth to the contention that delays in acquisition are a big factor in projects being stalled. The Economic Survey has highlighted this. It's strange that the media has not highlighted the point adequately and it required Nitin Desai to point this out in his column in BS:

This year's Economic Survey has
a full chapter on what is holding back the revival of investment. As
part of this, after a careful analysis of stalled projects, it concludes
that, "over-exuberance and a credit bubble as the primary reasons
(rather than lack of regulatory clearances) for stalled projects in the
private sector." In Table 4.3, which lists reasons for project hold-ups,
land acquisition does not even figure as a reason for the stalled
projects in the private sector but does for the public sector projects.
The other bugbear of the corporate sector, environmental clearances,
does not figure in the list, though non-environmental clearances do.
An RTI activist, Venkatesh Nayak, obtained more granular information
from the ministry of finance for the 804 stalled projects that were the
basis for the Economic Survey chapter. This detailed information showed
that of the 804 projects only 66 were stalled because of land
acquisition problems. Incidentally, these 66 include 10 projects for
hotels, resorts, malls and airports.

Desai cites a study which makes an interesting point. There was acquisition of land by government before 1991 and after 1991. Land acquisition before 1991 did not stir up any major controversy. Why? Because it was patently for public purposes. Post-1991, acquisition became a looting game for corporates abetted by the political class. The UPA government had a big role in the misuse of land acquisition in the name of SEZs.

It's hard to disagree with Desai's bottomline on the subject:

The role of the state in land acquisition for commercial market-oriented
private or public projects should be as a facilitator and overseer of
transactions involving large-scale purchase to ensure compliance with
the law made for this purpose, running a localised Torrens system for
providing absolute titles for the acquired land, and promoting the use
of land adjustment schemes where feasible. Compulsory acquisition should
be restricted to very precisely defined non-commercial public purposes.